Here we are again, close to the end of the financial year. If you’ve been working on your tax planning in the past, you know this is the season for it. Proactive tax planning is important to help you ease your compliance burden, make more sound business decisions, and maximise your tax savings.
If you haven’t started on your tax planning, you need to start now. It’s always best to plan ahead to make sure you’re maximising all strategies available to you and you’re not spending too much on unnecessary taxes. We’ve put together some tax planning tips and strategies to help you get started.
Think ahead for the next financial year
One common tax planning strategy is considering your projected income to make sound strategies. Consult with your accountant to assess your projected income in the coming years. If your projected income for this financial year is higher than next year, you may consider prepaying some of your expenses. You may also defer income if possible.
If you are classified as a ‘small business entity’ (business turnover of less than $10 million), you may consider paying expenses such as insurance, software subscriptions, office supplies, loan interest payments, etc. in advance to claim prepaid expenses paid before 30 June 2022.
Keep in mind that if you’re going to use this in your tax planning strategy, you need to ensure that you follow ATO’s prepayment rules. Prepaid expenses should be less than $1,000 or meet the 12-month rule, which states that deductions from prepaid expenses can be claimed if the payment is incurred for an eligible service period not exceeding 12 months.
It’s also good to review your current cash flow and see if you can defer income and delay receipt of invoices until July. If this is a viable option for you, you may use this strategy to push your tax payable to the next financial year.
Take advantage of small business tax concessions
Small businesses with a turnover of less than $5 million are eligible for the small business income tax offset. There are other small business entity concessions available even for those businesses with a turnover of $10 million or more but less than $50 million.
These concessions include:
- Simplified trading stock rules
- PAYG instalments concession
- 2-year amendment period
- Excise concession
Check if you’re eligible for temporary full expensing
The temporary full expensing incentive was extended until 30 June 2023. This allows businesses with an aggregated turnover of less than $5 billion to immediately deduct the business portion of the cost of eligible new or second-hand depreciating assets.
Complete a stocktake
Review your stock on hand on 30 June 2022. If your business has inventory/stock on-hand as of 30 June 2022, you need a stocktake to determine the value of this inventory for the accounting and taxation process. Write off stocks that are damaged or obsolete. Stock can be valued at the lowest amount for each individual item.
Review your business structure
Ensure your business structure is right for your specific circumstances. Some business structures can utilise reduced or capped tax rates.
For example, the full company tax rate is 30%, but base rate entity companies can apply the lower company tax rate of 25% in the 2021-22 income year and the succeeding years.
Take note that these tips and strategies are general in nature and it’s always best to consult a tax specialist to help you tailor a tax planning strategy that is right for your business. We’ve also prepared a free downloadable tax planning guide here.
Set up a meeting with our tax and compliance specialists and let’s get started on proactive tax planning for your business to ensure your compliance needs are well-managed and you utilise all available tax-efficient strategies. Contact us today or call us at 07 3878 9181.